Univ. of Phoenix pays $67.5 million to settle False Claims Act charges in declined qui tam

by bvernia | December 15th, 2009

On December 15, DOJ announced that the University of Phoenix had agreed to pay $67.5 million to resolve claims that it received federal student loan funds after paying recruiters to obtain students, in violation of Department of Education regulations:

Whistleblowers Mary Hendow and Julie Behn, two former University of Phoenix employees, alleged that the university accepted federal student financial aid while in violation of statutory and regulatory provisions prohibiting post-secondary schools from paying admissions counselors certain forms of incentive-based compensation tied to the number of students recruited.

The announcement is an unusual one, because it describes a settlement reached in a qui tam suit in which DOJ declined to intervene shortly after its filing, in 2003. The relator’s share – $19 million – amounts to approximately 28% of the total.
DOJ’s statement described its participation in the case:

Though the United States did not intervene in this action, the Government provided support and assistance to the whistleblowers at many stages of the case, including filing friend-of-the-court briefs when the case was on appeal to the Ninth Circuit.

Robert J. Nelson and Steven Swerdlow of San Francisco’s Lieff, Cabraser, Heimann & Bernstein, LLP, represented the whistleblowers. A third former employee had sought to intervene in the case, but was refused because he was representing himself pro se. The Ninth Circuit affirmed that decision in 2008.

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